Today we're talking about cannabis funds. Yep, did you ever think you'd see publicly-traded cannabis funds in your lifetime? Me neither!
Occasionally I'll get a request from a subscriber along the lines of…
Susan, this is great but can't I just give you some money and have you invest it in cannabis for me?
I get it.
It can be time-consuming and a little daunting to build a portfolio of these small cap stocks even WITH my guidance and research.
The bad news is I don't have a cannabis fund.
The good news is there are three cannabis funds open to investors right now that are pretty solid.
What kind of funds?
An ETF, or exchange-traded fund, is a security that tracks an index, a commodity, bonds, or a basket of stocks like an index fund.
Unlike mutual funds, an ETF trades like a common stock on a stock exchange.
ETFs experience price changes throughout the day as they are bought and sold.
ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors.
Like any other fund, a marijuana ETF offers diversification within the cannabis sector without limiting the potential upside of the bigger movement.
The AdvisorShares Vice ETF (NASDAQ:ACT) is more than just marijuana stocks. Just like the name suggests, it owns a variety of “vice” stocks with a lot of exposure to alcohol and tobacco stocks.
That’s not necessarily a bad thing though. It’s wise to diversify in all sectors. And this ETF is a quick and easy way to diversify among so-called sin stocks with just one simple purchase.
Right now, only about 14% of the fund is made up of marijuana stocks, but the portfolio manager believes that “an evolving landscape of select, U.S. federally legal cannabis-related companies across various formats provides upside potential that may lead to attractive growth opportunities.”
The ETFMG Alternative Harvest ETF (NYSE:MJ) is part of the ETF Managers Group fund family.
The fund was established back in late 2015, but it didn’t get its current name and ticker until February.
What I like is that the Alternative Harvest ETF is 100% invested in the legal cannabis business.
This allows access to international cannabis stocks that many U.S. investors find difficult to trade in their US-based brokerage accounts.
In my premium cannabis investing newsletter, we trade Canadian cannabis stocks but only if they have a “dual-listing” in the US via the OTC Markets.
Investing in a basket of stocks this way gets US investors into international stocks easily.
It also allows us to own expensive stocks for a fraction of their share price.
For example, the 2nd largest holding in the Alternative Harvest ETF is GW Pharmaceuticals (NYSE: GWP) currently trading at around $144 a share.
Alternative Harvest ETF is trading at around $30 per share.
So instead of paying $144 a share for one stock, you're paying $30 a share to own 38!
Last but not least, is the Horizons Marijuana Life Sciences Index ETF (OTCMKTS:HMLSF).
This exchange-traded fund was primarily built for and listed on Canadian stock exchanges but US investors get to invest via the dual listing on the OTC.
The fund’s managers have made a point of only investing in companies that derive most of their revenue from markets where cannabis is legal.
That means it doesn’t face the legal uncertainty risk that many U.S. cannabis companies face.
I'm sure more cannabis funds are coming and for good reason.
The medical marijuana market alone is expected to grow at an annual pace of more than 20% through 2022.
Meanwhile, more U.S. states are giving the green light to recreational marijuana.
The feds are finally beginning to respect individual states’ rights to make their own marijuana laws.
And looking beyond the United States — and into Canada — BDS Analytics believes the legal cannabis industry in North America will swell from 2017’s $9.2 billion to a market size of $47.3 billion by 2027.
That’s good news for my cannabis investors whether we're investing in individual stocks or cannabis funds!
Note From Susan: I run a popular premium cannabis investment newsletter and trade alerts service where I share research on individual cannabis stocks so that investors can build a portfolio in this exciting sector. Click here to subscribe!
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